THE FLAW IN EMPLOYER-BASED HEALTH INSURANCE
September 30, 2008
Employment based health insurance has a (sometimes literally) fatal flaw: it provides no protection for continuous coverage at reasonable premiums for people who leave employment and then contract a high risk condition, says the Philadelphia Inquirer.
This story is a classic case: Marty had coverage through his wife's job, but that coverage disappeared when she quit to have a baby. In contrast, had Marty bought his own coverage in the individual health insurance market, the insurer would have been required to continue covering him as long as he paid his premiums, and would be prohibited (especially in New Jersey) from raising his premiums because he got sick.
"After they lost health coverage through his wife's work, Marty Grassia undoubtedly found out what many New Jersey residents have discovered -- that New Jersey has one of the most highly regulated, expensive health insurance markets in the country," says Devon Herrick, a health economist and senior fellow with the National Center for Policy Analysis.
- Had Marty maintained continuous coverage, he would have access to an affordable, guaranteed issue policy in most states.
- But New Jersey has stringent regulations that drive up the cost of individual insurance to double or triple the national average.
- Undoubtedly, many couples have had to make such devastatingly hard choices - forgo New Jersey's costly health coverage and hope they don't get sick.
- Had Marty lived in Pennsylvania, his family would have had the option of purchasing much less expensive insurance.
What if the Grassias were in their mid 20's when they lost coverage? According to Herrick:
- A similar couple with a young child could get individual coverage for as little as $111 per month in Philadelphia (with a $10,000 deductible).
- A monthly premium of $158 would cut that deductible in half, and paying a $206 premium drops the deductible to $3,000.
- Any of these health plans could have helped protect the Grassias from such catastrophic financial problems.
- But these low-cost policies are not available in New Jersey due to over-regulation that consumer groups are now campaigning hard to change.
Source: Staff, "Deep in debt, a barber lives with a disease he can't afford," Philadelphia Inquirer, September 29, 2008.
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